Automotive Finance Market Size, Share & Trends Analysis Report By Provider Type, By Finance Type, By Purpose Type, By Vehicle Type, By Region, And Segment Forecasts, 2023 - 2030

Report Overview

The global automotive finance market size was valued at USD 259.84 billion in 2022 and is expected to register a compound annual growth rate (CAGR) of 7.3% from 2023 to 2030. The increasing global demand for electric vehicles is one of the major factors, expected to drive market growth. According to the Experian’s State of the Automotive Finance report, electric vehicles comprised 4.56% of new vehicle financing in Q4 2021, up from 2.25% in Q4 2020 and 1.34% in Q4 2019 in the U.S. According to this report, consumers in the U.S. are more likely to purchase new electric vehicles rather than lease them.

The growing importance of captive automotive finance worldwide is creating new opportunities for market growth. Captive finance is a subsidiary of an automaker that provides loans and financial services to the company's customers. The benefits of starting a captive finance company include personalized finance options for the customers, and equipment rental programs, among others. The companies such as Honda Finance, Ford, Infiniti, and Nissan are seeing strong growth in captive finance.

The growing importance of cryptocurrency across the automotive finance industry is expected to drive market growth. Various automotive technology providers are adopting cryptocurrency-based payments to enhance their offerings. For instance, in March 2022, Car Now, an automotive industry’s digital retailing company, announced its partnership with Cion Digital, a blockchain orchestration platform. Through this partnership, Car Now will offer auto dealers compliant and fast crypto payment and lending solutions.

Artificial intelligence technology is increasingly being used in the automotive finance sector, in order to improve the credit underwriting process, analyze the data, accurately predict whether the applicant can turn delinquent, and thus enhance the approval process. Various automotive artificial intelligence technology providers are making efforts to develop AI-enabled lending platforms. For instance, in October 2021, Upstart, a leading AI lending platform, announced the launch of Upstart Auto Retail software. This software includes AI-enabled financing features which enable the lenders to improve their customer experience.

The growing global demand for automotive refinancing is also one of the major factors, creating new opportunities for market growth. The demand for refinancing is growing due to its benefits, such as lower monthly car payments, reduced interest rates, and shortened loan terms. According to the statistics provided by Rate Genius, a fintech company, 16.0% more additional Americans applied to refinance their automotive loans in 2020 as compared to 2019. As compared to 2019, as many as 17.0% of additional borrowers refinanced their car loans successfully in 2020, as compared to 2019.

COVID-19 Impact Analysis

The outbreak of COVID-19 is anticipated to have an adverse impact on the market. The economic uncertainty has forced car buyers to postpone their purchase of a new vehicle. Despite the slowdown in car sales, auto lenders will have to accommodate an upsurge in servicing activity, such as refinancing and extensions. Auto lenders are adopting digital tools to expedite the service processes, remotely.

Provider Type Insights

The banks segment led the market and accounted for more than 57.0% share of the global revenue in 2022. The banks segment growth can be attributed to the fast-processing features with the necessity for least documentation, in addition to the high-reliability features. Earlier, banks are used to finance only around 70.0% to 80.0% of the total vehicle price. However, currently, these banks are offering 100% finance for the vehicle, owing to which customers are showing more interest in purchasing a new car, over a used car. The banks are increasingly adopting digital automotive finance in order to meet the changing customer needs across the globe.

The OEMs segment is anticipated to register the highest growth over the forecast period. Automotive OEMs provide better after-sales services due to the availability of identical automobile parts, like that of the vehicle financed, for repair or the replacement. Also, OEMs are considered as the future of mobility, owing to their positive impact on new business models. Furthermore, apart from providing products and services, OEMs are also focusing on offering motor vehicle insurance through their captive finance companies.

Finance Type Insights

The direct segment dominated the market and accounted for more than a 55.0% share of the global revenue in 2022. Consumers are focusing on determining the financing source, which effectively meets their requirements. Consumers directly apply for car loans at the credit union, banks, and other lending companies. Moreover, the customers have complete control over the lending process as this process doesn’t include any third-party salesperson or dealer. In the direct loan process, the consumer requires a large amount of time to choose a suitable lender as compared to the indirect loan process.

The indirect segment is anticipated to register the highest growth in the forecast period. The most important benefit of this indirect finance type is that it allows customers to take on-site expert advice from independent finance specialists. Also, these specialists ensure that their clients determine the best method to finance a vehicle as and when required. Besides, in indirect auto financing, customers can access and search for all loans at once. In the indirect loan process, the control of the loan is shared with the dealers and salesperson.

Purpose Type Insights

The loan segment led the market and accounted for more than 59.0% share of the global revenue in 2022. Loans have been a standard process of purchasing an automobile by most of the global population. As the credit environment started to advance, leasing and finance companies had extra funding sources to make accessible to the consumers. Moreover, banks and credit unions are targeting customers with low-interest rate loans. The automotive loan companies offer customers services such as a wide network of dealerships, dedicated customers support, and 24/7 access to loan accounts. These offered services enable the lending companies to enhance their customer's experience.

The leasing segment is anticipated to register the highest growth over the forecast period. The segment growth can be attributed to the increasing number of leasing providers in emerging economies, such as India, China, and Japan. The leasing services are offered for both new as well as used cars. The growing trend of digitization is making a massive impact in the automotive leasing industry. Moreover, companies in automobile leasing are enhancing consumer experience and leveraging their profit margins by heavily investing in digitization technologies, such as blockchain.

Vehicle Type Insights

The passenger vehicles segment led the market and accounted for more than 62.0% share of the global revenue, in 2022. The segment growth can be attributed to the increasing need for mobility due to the increased distances between work, home, education, leisure, and shopping facilities. The automotive industry is growing due to the constant change in customer needs. The need for innovations in safety systems, infotainment systems, advanced driver-assistance systems, telematics, autonomous vehicles, and in-dash controls is increasing, especially in passenger vehicles.

The commercial vehicles segment is anticipated to witness significant growth during the forecast period. Since, commercial vehicles are expensive in comparison to other vehicles, numerous banks, and financial institutions have introduced reasonable loan schemes, which include simple terms and conditions. Moreover, the processing time needed to approve commercial vehicle loans is less in comparison to passenger vehicles. These aforementioned factors are expected to contribute to the segment growth during the forecast period. At the same time, the rising demand for light commercial vehicles, due to their versatile performance in varied conditions, is also driving the segment growth.

Regional Insights

The European region dominated the automotive finance market and accounted for more than a 39.0% share of the global revenue in 2022. The regional market growth can be attributed to the presence of a large number of automotive finance service providers in the region. Numerous market players are focusing on offering their services through mobile and online channels. This initiative is giving these players an edge over traditional players. At the same time, the growing demand for electric vehicles in the region is also driving the market growth within the region.

The Asia Pacific regional market is expected to emerge as the fastest-growing regional market during the forecast period. The growing number of favorable government initiatives in economies, such as India, Japan, and China, to promote growth in the automotive industry and maintain consumer interest, is expected to create growth opportunities for the regional market. At the same time, the increasing population in this region is also driving the market expansion. Moreover, the growing adoption of telematics is also creating new opportunities for market enlargement.

Key Companies & Market Share Insights

The market is fragmented in nature. The market is in the growth stage, and also the competition is anticipated to intensify over the forecast period. Prominent players are adopting various strategies, such as partnerships, strategic joint ventures, mergers & acquisitions, and geographical expansion, to cement their foothold in the market. The emerging subscription business is altering the market dynamics.

Industry players are focusing on exploring this subscription business model, as consumer interest is very high in purchasing vehicles. The appeal of subscriptions is fueling higher growth rates in the market. The COVID-19 pandemic has augmented the growth of online and digital channels for business-to-consumer purchases. In reply to these trends, OEMs and industry players have started to virtualize their dealerships or agreements and operate remotely. Some of the prominent players in the global automotive finance market include:

• Ally Financial

• Bank of America

• Capital One

• Chase Auto Finance

• Daimler Financial Services

• Ford Motor Credit Company

• GM Financial Inc.

• Hitachi Capital

• Toyota Financial Services

• Volkswagen Financial Services

 Automotive Finance Market Report Scope

Global Automotive Finance Market Segmentation

The report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2017 to 2030. For this study, Grand View Research has segmented the global Automotive Finance Market Report based on the provider type, finance type, purpose type, vehicle type, and region.

• Provider Type Outlook (Revenue, USD Billion, 2017 - 2030)

  • Banks

  • OEMs

  • Other Financial Institutions

• Finance Type Outlook (Revenue, USD Billion, 2017 - 2030)

  • Direct

  • Indirect

• Purpose Type Outlook (Revenue, USD Billion, 2017 - 2030)

  • Loan

  • Leasing

  • Others

• Vehicle Type Outlook (Revenue, USD Billion, 2017 - 2030)

  • Commercial Vehicles

  • Passenger Vehicles

• Regional Outlook (Revenue, USD Billion, 2017 - 2030)

  • North America

    • U.S.

    • Canada

  • Europe

    • Germany

    • U.K.

  • Asia Pacific

    • China

    • India

    • Japan

  • Latin America

    • Brazil

  • Middle East & Africa